Goals but few commitments in trade pact

June 30, 1995|By New York Times News Service

GENEVA, Switzerland -- In the long and tortuous history of trade disputes between Japan and the United States, no president has ever talked a tougher game than Bill Clinton. No administration threatened so convincingly to use its big stick unless Tokyo agreed to fundamental, precedent-shattering change in the way it did business.

Mickey Kantor, Mr. Clinton's aggressive trade representative, spoke repeatedly in the months leading up to Wednesday's accord on automotive trade of the need for a "momentous shift" that would "break the back" of the network of collusive relationships that keep outsiders -- foreign and domestic -- at bay.

For the first time, an American administration was unified in its willingness to use the blunt and ugly weapon of punitive trade sanctions to achieve its goal. A few days ago, Vice President Al Gore summed up the administration's stance: "We're not going to blink."

But in the end, Mr. Clinton settled for an agreement that requires far less change in Japanese business practices than his political oratory had suggested would have been acceptable.

Even some of Mr. Clinton's closest economic aides conceded yesterday that they might have let the president set too high a hurdle. Almost any accord was going to fall short of the broad objectives of remaking the structure of Japan's auto industry. Some are also wondering if they jumped too early: Could Washington have won broader change it if had gone through with its threatened sanctions?

"These are questions we'll be asking ourselves for a long time," a senior administration official deeply involved in the issue said hours after Mr. Kantor and Ryutaro Hashimoto, Japan's minister of international trade and industry, declared that they had bridged the unbridgeable. "But we all looked over the precipice and discovered we couldn't see the bottom. The sanctions were big risk. So we took what we had in hand."

Clearly, Mr. Clinton got more than he would have without resorting to extreme pressure, and may be a lot more. For all the confrontational language, however, he ended up with an agreement that goes only modestly beyond past accords.

It is filled with goals but few commitments. It contains some specific, important regulatory changes but no declarations of broad reform. There are an impressive series of benchmarks to measure progress but no penalties if progress is not made.

If Japan's economy recovers over the next three years, the agreement may yield the $9 billion or so in extra auto-parts sales for American companies that Mr. Clinton says it will. But the goal was not just sales, but dismantling the system that Japan has built up over 40 years.

To no one's surprise, however, Mr. Kantor and his negotiating team ran headlong into the three realities of economic diplomacy with Tokyo that have changed very little since Richard M. Nixon declared 25 years ago that the trade deficit with Japan, then a fraction of its current level, had reached intolerable proportions.

The first is that even the most comprehensive trade agreements are by nature narrow and precise. They are tiny little ice chips off the glacier. The White House said it wanted an accord that would remake the world's second-largest economy and strike fear into the hearts of Asian countries tempted to imitate Japan's model. But what it got was an agreement that expands the number of garages and mechanics who are permitted to make repairs for car inspections in Japan and that cajoles Toyota dealers into thinking about putting a Ford Taurus in their windows.

The second reality is that "equal access" to Japan's markets is a very subjective thing, as dependent on Detroit's willingness to invest heavily as on Japan's willingness to open its doors. For all the shouting, none of the Big Three has declared how many billions each will spend to seriously take on the world's second-largest car market.

Now they have the opportunity. Mr. Kantor made the most headway in his demands that Japan crack down on car companies that put pressure on their dealers not to handle competitive American lines.

Japanese officials say this is a major advance, but one that will fall apart if the Big Three fail to invest heavily in some of the world's most expensive car dealerships. And they clearly think that even if you can take the Shinoda family to the showroom, you can't persuade them to buy oversized Cadillac Sevilles.

The third reality is that broader political alliances still count for a lot. Even the most export-focused administration in decades decided that it was not worth risking its most important relationship in the Pacific for the extra concessions that might have been gained.

"In the end, I think people got scared," said Alan Tonelson, a fellow at the Economic Strategy Institute, a member of a group of trade hawks who were trying to stiffen the administration's resolve. "Boeing was afraid of retaliation; the American car companies were afraid of what kind of investments they would have to make; the intelligence agencies and the State Department were concerned that the broader relationship might be in jeopardy. So here's the message we ended up with: We talk loudly and carry a tiny stick."